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2008
THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA
HOUSE OF REPRESENTATIVES
Temporary residents' superannuation legislation amendment bill 2008
superannuation (departing australia superannuation payments tax) amendment
bill 2008
EXPLANATORY MEMORANDUM
(Circulated by the authority of the
Treasurer, the Hon Wayne Swan MP)
Table of contents
Glossary 5
General outline and financial impact 7
Chapter 1 Payment of unclaimed superannuation to the Commissioner of
Taxation 11
Chapter 2 Payment of unclaimed superannuation from the Commissioner of
Taxation 29
Chapter 3 Other changes 39
Chapter 4 Regulation impact statement 53
Index 63
Glossary
The following abbreviations and acronyms are used throughout this
explanatory memorandum.
|Abbreviation |Definition |
|ATO |Australian Taxation Office |
|Commissioner |Commissioner of Taxation |
|DASP |departing Australia |
| |superannuation payment |
|DASPT Bill |Superannuation (Departing |
| |Australia Superannuation |
| |Payments Tax) Amendment Bill |
| |2008 |
|DIAC |Department of Immigration and|
| |Citizenship |
|ITAA 1997 |Income Tax Assessment Act |
| |1997 |
|main Bill |Temporary Residents' |
| |Superannuation Legislation |
| |Amendment Bill 2008 |
|Regulations |Superannuation (Unclaimed |
| |Money and Lost Members) |
| |Regulations 1999 |
|RSA |retirement savings account |
|RSA Regulations |Retirement Savings Accounts |
| |Regulations 1997 |
|SG |superannuation guarantee |
|SIS Regulations |Superannuation Industry |
| |(Supervision) Regulations |
| |1994 |
|S(UMLM) Act |Superannuation (Unclaimed |
| |Money and Lost Members) Act |
| |1999 |
|TAA 1953 |Taxation Administration Act |
| |1953 |
|the/this measure |temporary residents' |
| |superannuation measure |
General outline and financial impact
Temporary residents' superannuation
The Temporary Residents' Superannuation Legislation Amendment
Bill 2008 (main Bill) and the Superannuation (Departing Australia
Superannuation Payments Tax) Amendment Bill 2008 (DASPT Bill):
. implement the Government's proposed temporary residents'
superannuation measure (the measure); and
. amend legislation in respect of superannuation for
temporary visa holders.
The Government's temporary residents' superannuation measure
The Australian Government provides substantial taxation concessions
for superannuation savings in order to encourage individuals to
save for their retirement. However, restrictions are placed on the
early withdrawal of superannuation savings prior to the individual
reaching their preservation age to ensure that they are used for
genuine retirement income purposes. In limited circumstances, such
as for terminal medical conditions, severe financial hardship and
compassionate grounds, individuals can apply for the early release
of their superannuation benefits.
Superannuation contributions, earnings and benefits are
concessionally taxed in Australia on the basis that they will be
used to meet the retirement income needs of Australians.
Accordingly, where those benefits are accessed early prior to
reaching preservation age, additional tax is generally imposed to
recover the tax concessions.
Individuals who hold an eligible temporary resident visa are
currently able to access their superannuation benefits early (prior
to reaching preservation age) if their visa has been cancelled or
has expired and they have departed Australia, by applying for a
departing Australia superannuation payment (DASP). A DASP is
subject to a final withholding tax to recoup the tax concessions
provided to the superannuation of temporary residents.
Despite the ability to claim their superannuation many temporary
residents do not do so and leave amounts of small and lost balances
in the superannuation system, thereby contributing to the total
amount of lost monies in the system.
Currently, the Superannuation (Unclaimed Money and Lost Members)
Act 1999 (S(UMLM) Act) requires superannuation providers to report
and pay the superannuation of a member to the Commissioner of
Taxation (Commissioner) as unclaimed money where certain conditions
relating to the member are met. Broadly speaking, 'unclaimed
money' is money which the superannuation provider holds in respect
of members who have reached the eligibility age (65) or died and
the provider is unable to contact the person entitled to receive
it.
Schedule 1 to the main Bill contains amendments to the S(UMLM) Act
and other Acts so that when temporary visa holders leave Australia
without taking their superannuation with them, relevant amounts are
reportable and payable to the Commissioner as unclaimed
superannuation.
The main Bill and the Superannuation (Departing Australia Superannuation
Payments Tax) Amendment Bill 2008
In broad terms, the amendments contained in Schedule 1 to the main
Bill:
. include as unclaimed superannuation the superannuation of
a person who was previously a holder of a temporary visa,
where at least six months have passed since the person's
temporary visa ceased to be in effect and they have left
Australia;
. require superannuation providers that hold such unclaimed
superannuation for departed temporary visa holders to pay
such amounts to the Commissioner; and
. allow departed temporary visa holders to recover any
amounts paid to the Commissioner as unclaimed
superannuation where certain conditions have been
satisfied (subject to the DASP withholding tax).
The measure is seeking to reduce the number of lost accounts and
unclaimed money in the superannuation system that can arise when
temporary visa holders leave Australia without taking their
superannuation benefits with them.
Date of effect: This measure commences from a day to be fixed by
Proclamation, or the first day after a period of six months from
when the Bill receives Royal Assent, whichever is earlier.
Proposal announced: A discussion paper on the proposal was
released for public consultation on 5 May 2008. The Government's
final decision was announced in the Minister for Superannuation and
Corporate Law's Press Release No. 050 of 8 August 2008.
Financial impact: This measure will have these positive revenue
implications:
|2007-08 |2008-09 |2009-10 |2010-11 |2011-12 |
|Nil |$251m |$378m |$299m |$224m |
Compliance cost impact: Superannuation funds are estimated to, on
average, have implementation costs of $33,000 per provider and
ongoing annual costs of $2,500 per provider.
Provisions, for costs of $10 million per annum for the Australian
Taxation Office (ATO) and $2 million per annum for the Department
of Immigration and Citizenship (DIAC) over the forward estimates
period, were made in the 2007-08 Mid-Year Economic and Fiscal
Outlook.
Summary of regulation impact statement
Regulation impact on business
Impact: This measure will reduce the number of lost accounts in
the superannuation system and ensure that superannuation tax
concessions are well targeted at individuals who will retire in
Australia.
The measure will rely on processes similar to the existing
processes used by superannuation funds to transfer unclaimed money
to the Commissioner.
Main points:
Individuals
. In 2006-07 there were over 239,152 temporary resident
visas granted with work rights and over 87,300 business
long-stay 457 visas issued.
. Departed temporary residents who do not claim their
superannuation within six months of departure will have
their superannuation paid to the ATO as unclaimed money.
. Departed temporary residents will be able to claim, for an
indefinite period, their superannuation benefits less the
DASP tax, back from the ATO.
Superannuation funds
. Superannuation funds will pay amounts that are defined as
unclaimed for departed temporary residents to the
Commissioner.
. This measure will assist to reduce the number of small and
lost accounts that superannuation funds need to manage.
Government agencies
. The ATO's tasks will include:
- matching those individuals identified by the DIAC as
departed temporary visa holders with account information
provided by superannuation funds and then notifying
funds;
- paying amounts to individuals or their legal personal
representative where amounts are later claimed; and
- where directed by an individual in certain circumstances
rolling over amounts into a superannuation fund.
. The DIAC will be required to identify those individuals
who the measure may impact upon and provide this
information to the ATO.
Chapter 1
Payment of unclaimed superannuation to the Commissioner of Taxation
Outline of chapter
1. Part 1 of Schedule 1 to the Temporary Residents' Superannuation
Legislation Amendment Bill 2008 (main Bill) amends the
Superannuation (Unclaimed Money and Lost Members) Act 1999 (S(UMLM)
Act) to implement the Government's temporary residents'
superannuation measure, including by inserting Part 3A into the
S(UMLM) Act.
2. This chapter outlines how the rules in Part 3A require
superannuation providers to pay the unclaimed superannuation of
departed temporary visa holders to the Commissioner of Taxation
(Commissioner). This chapter also defines key concepts used in
Part 3A.
3. All references to legislative provisions in this chapter are
references to the main Bill unless otherwise stated.
Context of amendments
4. A superannuation provider of a fund holds unclaimed superannuation
for a person if the person has a superannuation interest in the
fund and at least six months have passed since they held a
temporary visa that ceased to be in effect and left Australia.
Under the S(UMLM) Act these amounts may become payable to the
Commissioner.
5. Part 3A of the S(UMLM) Act contains rules which require the
Commissioner to give superannuation providers a notice in certain
circumstances, and for providers who receive such notices to give a
statement and to pay an amount to the Commissioner by a specified
time.
Summary of new law
Key concepts
6. For the purposes of Part 3A of the S(UMLM) Act, several new
concepts are inserted into the definition provision at section 8.
Notices to superannuation providers
7. Under Part 3A of the S(UMLM) Act, the Commissioner must give a
superannuation provider for a fund a written notice identifying a
person or persons where certain circumstances exist. These
circumstances include the person(s) identified being a departed
temporary visa holder with a superannuation interest in the fund.
8. No notice is required to be given to providers of state or
territory public sector superannuation schemes or to providers of
unfunded public sector superannuation schemes.
Statement from superannuation providers
9. A superannuation provider that receives a notice from the
Commissioner must give the Commissioner a statement in the approved
form and with the required information, by a specified time. This
requirement applies equally to providers of defined benefit funds
and providers of accumulation funds.
Payment by superannuation providers
10. Broadly speaking, a superannuation provider that receives a notice
from the Commissioner must pay to the Commissioner the difference
between:
. the amount that would have been payable from the fund to a
person identified in the notice had that person requested
payment in connection with their departure (the notional
departing Australia superannuation payment (DASP)); and
. the total of amounts paid or payable from the fund in
respect of the person.
The difference (if any) must be paid to the Commissioner by the
required time or the provider accrues general interest charge on
the unpaid amount and commits an offence.
11. This requirement applies equally to providers of defined benefit
funds and providers of accumulation funds.
Comparison of key features of new law and current law
|New law |Current law |
|The superannuation of a |The superannuation of a |
|departed temporary visa |departed temporary visa |
|holder, who does not take|holder that does not take|
|their benefits with them |their benefits with them |
|upon departure as a DASP,|upon departure as a DASP |
|could be paid to the |remains in the fund until|
|Commissioner as unclaimed|it is claimed or becomes |
|superannuation. The |payable to the |
|departed temporary visa |Commissioner as unclaimed|
|holder can later claim |money (eg, reached |
|back the amount from the |age 65, no contributions |
|Commissioner. |received and no contact).|
| |The departed temporary |
| |visa holder can later |
| |claim the amount back |
| |from the Commissioner. |
Detailed explanation of new law
Key concepts
12. For the purposes of administering the rules in Part 3A of the
S(UMLM) Act, the following concepts are inserted into the
definition provision at section 8 of the S(UMLM) Act:
. Approved form has the meaning given by section 388-50 in
Schedule 1 to the Taxation Administration Act 1953
(TAA 1953) [Schedule 1, item 5]. The offence provisions
and administrative penalties under the TAA 1953 for giving
false or misleading information in the approved form and
for failing to give the approved form by the required
time, apply with respect to all approved forms under the
S(UMLM) Act (ie, to Part 3A as well as to section 16).
. Engage in conduct means to do an act or to omit to perform
an act [Schedule 1, item 6]. This definition is relevant
for the purpose of the offence provision that applies if
an amount is not paid to the Commissioner by the day it is
due and payable [Schedule 1, item 16, subsection 20F(6)].
. General interest charge means the charge worked out under
Part IIA of the TAA 1953 [Schedule 1, item 7].
. Leave Australia (and left Australia) has the same meaning
as under the Migration Act 1958 [Schedule 1, item 8].
. Legal personal representative of a person who has died is
an executor or administrator of the person's estate
[Schedule 1, item 9].
. Scheduled statement day is defined as the day specified by
the Commissioner by legislative instrument, by the end of
which a statement must be given by a superannuation
provider to the Commissioner if required to do so under
Part 3A of the S(UMLM) Act [Schedule 1, items 10 and 16,
section 20B].
. Superannuation interest means an interest in a
superannuation fund, an approved deposit fund or a
retirement savings account (RSA) [Schedule 1, item 11].
'Approved deposit fund', 'RSA' and 'superannuation fund'
are defined under section 8.
. Terminal medical condition has the same meaning as under
the Income Tax Assessment Act 1997 (ITAA 1997)
[Schedule 1, item 12].
Notices to superannuation providers
13. Part 3A of the S(UMLM) Act requires the Commissioner to give a
written notice (section 20C notice) to a superannuation provider
for a fund identifying a person, if the Commissioner is satisfied
that all of the following circumstances exist:
. there are reasonable grounds to believe that the person
has a superannuation interest in the fund;
. the person was previously a holder of a temporary visa,
other than a visa prescribed by the Superannuation
(Unclaimed Money and Lost Members) Regulations 1999
(Regulations), that has ceased to be in effect;
. the person left Australia after starting to be the holder
of the visa;
. at least six continuous months have passed since the visa
ceased to be in effect and the person left Australia; and
. the person:
- is not a holder of a temporary visa or permanent visa;
- is not an Australian citizen or New Zealand citizen; and
- has not made a valid application for a permanent visa
that has not been finally determined under the Migration
Act 1958.
[Schedule 1, item 16, subsection 20C(1)]
In general terms, the effect of a provider receiving a notice from
the Commissioner under section 20C of the S(UMLM) Act is the
requirement to give a statement and make a payment to the
Commissioner by a certain time (refer to paragraphs 1.28 and 1.35).
14. Regulations could be made to prescribe certain temporary visa
holders who must not be identified in a section 20C notice that is
given to a provider [Schedule 1, item 16,
subparagraph 20C(1)(b)(i)]. This reduces the range of temporary
visa holders whose unclaimed superannuation is required to be paid
to the Commissioner. Prescribing 'excluded' temporary visa holders
in the Regulations allows flexibility, for example to respond to
changing circumstances (ie, if a new temporary visa class is
created) and to cater appropriately for any specific visa classes.
15. The Commissioner is not required to give a notice under section 20C
of the S(UMLM) Act (even where all the circumstances in paragraph
1.13 exist) to a superannuation provider that is either:
. the trustee of a state or territory public sector
superannuation scheme within the meaning of section 18 of
the S(UMLM) Act; or
. the trustee of an unfunded public sector scheme as defined
in the Superannuation Guarantee (Administration) Act 1992.
[Schedule 1, item 16, subsection 20C(3)]
16. Where the Commissioner is required to give a notice under section
20C of the S(UMLM) Act to a provider in respect of a person, the
notice must identify the person and must include information
prescribed by the Regulations [Schedule 1, item 16, subsection
20C(2)]. The notice may contain the tax file number of the person
and of the fund [Schedule 1, item 16, section 25A]. Where the
notice contains the tax file number of the person, it is taken to
be quoted (for superannuation purposes) under section 295-615 of
the ITAA 1997.
17. A notice given by the Commissioner under section 20C of the S(UMLM)
Act is not a legislative instrument under section 5 of the
Legislative Instruments Act 2003 as it does not have a legislative
character which determines or alters the content of the law; it is
merely declaratory of the law and causes the law to be applied.
[Schedule 1, item 16, subsection 20C(5)]
18. While the Commissioner is not allowed to amend a notice under
section 20C of the S(UMLM) Act given to a provider, the
Commissioner is, however, required to revoke the notice where
certain conditions have been met (refer to paragraph 1.20).
[Schedule 1, item 16, subsection 20C(4) and section 20J]
19. A superannuation provider or person who is dissatisfied with a
section 20C notice can make an objection under Part IVC of the
TAA 1953. [Schedule 1, item 16, section 20P]
Revoking a notice
20. The Commissioner must revoke a notice given under section 20C of
the S(UMLM) Act to a superannuation provider, if the Commissioner
is satisfied that:
. a notice should never have been given to the provider in
respect of a person (ie, the circumstances for giving the
notice did not exist in the first place); or
. the circumstances relating to a person have changed since
the time the notice was given (ie, the circumstances for
giving the notice no longer exist).
[Schedule 1, item 16, subsection 20J(1)]
21. For instance, the Commissioner is required to revoke a notice if
satisfied that:
. there were no, or there are no longer, reasonable grounds
for believing that the person identified in the notice has
a superannuation interest in the provider's fund; or
. where there are reasonable grounds for believing that the
person identified in the notice has a superannuation
interest in the fund, that:
- the person has never held a temporary visa;
- if the person has held a temporary visa, then the visa
is one that is prescribed by the Regulations or the visa
has never ceased to be in effect;
- if the person has held a temporary visa (but is not one
prescribed in the Regulations) and it has ceased to be
in effect, the person has not left Australia;
- if the person has held a temporary visa that has ceased
to be in effect and the person has left Australia, a
period of at least six continuous months has not passed
since the later of those two events;
- the person is an Australian or New Zealand citizen; or
- the person is the holder of a temporary visa or
permanent visa, or has made a valid application for a
permanent visa that has not been finally determined
under the Migration Act 1958.
[Schedule 1, item 16, subsection 20C(1)]
22. The revocation must be in the form of a written notice given by the
Commissioner to the provider [Schedule 1, item 16, subsection
20J(2)]. The revocation notice is not a legislative instrument
under item 33 of Part 1 of Schedule 1 to the Legislative
Instruments Act 2003.
23. If the Commissioner revokes an earlier notice, then the effect of
the revocation is that the earlier notice is taken to have never
been given [Schedule 1, item 16, subsection 20J(3)]. Accordingly,
where the Commissioner does revoke an earlier notice, the provider
is not required to give a statement nor make a payment to the
Commissioner under Part 3A of the S(UMLM) Act in connection with
that earlier revoked notice.
24. However, a revocation by the Commissioner has no effect where at
least one of the following conditions exists [Schedule 1, item 16,
subsection 20J(4)]:
. before the revocation, the provider has already made a
payment to the Commissioner because of the earlier notice
[Schedule 1, item 16, subsection 20J(5)]; or
. the revocation was made less than 28 days before the
required time for the provider to give a statement to the
Commissioner ('scheduled statement day'), and before the
end of that day the provider has either given a statement
or made a payment to the Commissioner because of the
earlier notice [Schedule 1, item 16, subsection 20J(6)].
For both above conditions, an amount that has been paid to the
Commissioner can later be claimed back (refer to Chapter 2). The
second condition exists to allow providers who have already
commenced processes to respond to the Commissioner's earlier
notice, to continue with their processing.
25. If a provider receives a revocation notice less than 28 days before
the scheduled statement day, and before that day the provider has
given a statement or made a payment because of a notice under
section 20C of the S(UMLM) Act, then the revocation has no effect
[Schedule 1, item 16, subsection 20J(6)]. That is, the section 20C
notice is not taken to have never been given, that notice stands
and the statement or payment has been given because of a section
20C notice. The provider is discharged from any further liability
in respect of the amount paid [Schedule 1, item 16, section 20G].
A payment made in connection with a section 20C notice can later be
claimed back (refer to Chapter 2).
26. However, a section 20C notice that is revoked by the Commissioner
28 days or more before the scheduled statement day and prior to
payment being made by the provider because of that notice, has the
effect that the notice was never given to the provider [Schedule 1,
item 16, subsections 20J(3) and (6)]. Accordingly, a
superannuation provider that gives a statement and/or makes a
payment after the revocation, purportedly because of a notice under
section 20C of the S(UMLM) Act, cannot rely on the notice for
giving the statement and is not discharged from any liability
because of the payment.
27. Where the revocation of an earlier notice would not have effect
(refer to paragraph 1.24), the Commissioner is not required to
revoke that earlier notice. [Schedule 1, item 16, subsections
20J(4) and (7)]
1.
The Commissioner issues a notice under section 20C of the
S(UMLM) Act to a superannuation provider in respect of
member Catherine. Assume that the next scheduled statement
day after the notice is given is 1 May in a year. The
Commissioner revokes the earlier notice on 1 March of that
year after being satisfied the circumstances for giving that
notice no longer exist. The revocation has the effect that
the earlier notice is taken to never have been given. Any
subsequent payment by the provider because of the earlier
notice does not discharge the provider of any liability in
respect to that payment because the earlier notice has been
revoked (and therefore taken to never have been given). The
amount paid can be later claimed back by Catherine.
Assume instead the Commissioner revokes the earlier notice
on 10 April in that year (which is less than 28 days before
the scheduled statement day). If the provider makes a
payment because of the earlier notice by 1 May in that same
year (assuming the amount paid was properly worked out and
paid in full), the revocation is taken to have no effect and
the provider is discharged from further liability in respect
to the amount paid. The amount paid can be later claimed
back by Catherine.
Superannuation providers to give statements to the Commissioner
28. A superannuation provider that receives a notice under section 20C
of the S(UMLM) Act from the Commissioner which has not been
revoked, must give to the Commissioner a statement in the approved
form and by the required time [Schedule 1, item 16, sections 20D
and 20E]. The statement must be given to the Commissioner by the
end of the next scheduled statement day after the notice which the
statement relates to was given [Schedule 1, item 16, paragraph
20E(2)(a)].
29. However, if a notice under section 20C of the S(UMLM) Act is given
to a provider less than 28 days before the next scheduled statement
day after the notice was given, the provider is required to give
the statement to the Commissioner by the end of the following
scheduled statement day. [Schedule 1, item 16, paragraph
20E(2)(b)]
1.
Assume the scheduled statement days in each year are 1 May
and 1 November. If a notice under section 20C of the
S(UMLM) Act was given by the Commissioner to a
superannuation provider on 1 April in a year, the provider
is required to give the Commissioner a statement in the
approved form by the end of 1 May that year.
However, if the notice had been given by the Commissioner to
the provider on 10 April in a year, the provider is required
to give the statement in the approved form to the
Commissioner by the end of 1 November that year.
30. The Commissioner may defer the time by which a statement is
required to be given by a provider, under section 388-55 in
Schedule 1 to the TAA 1953. A provider that fails to give the
statement by the required time commits an offence under section 8C
of the TAA 1953, and could be subject to an administrative penalty
under Division 286 in Schedule 1 to the TAA 1953.
31. A provider that receives a notice under section 20C of the S(UMLM)
Act from the Commissioner which has not been revoked, is required
to give a statement in the approved form to the Commissioner by the
required time even where:
. the person identified in the notice does not have a
superannuation interest in the fund at the time the
statement is required to be given; or
. there is no amount payable to the Commissioner by the
provider in respect of the person (refer to paragraph
1.35).
[Schedule 1, item 16, subsection 20E(3)]
32. The provider must give the required information in the statement in
the approved form. The nature of the required information must be
relevant to the superannuation interest in the fund of the person
identified in the notice and/or to the administration of Part 3A of
the S(UMLM) Act and related tax legislation [Schedule 1, item 16,
subsection 20E(1)]. This facilitates, amongst other things, the
collection of information on the taxation components of amounts
paid to the Commissioner, for the purpose of making payments when
the amounts are later claimed from the Commissioner.
33. The approved form may require the statement to contain the tax file
number of the fund, of the superannuation provider and of the
person identified in the notice (if the person has quoted it to the
provider or it is in the notice) [Schedule 1, item 16, subsection
25(2A)]. A notice that contains the tax file number of a person is
taken to be quoted to the provider for superannuation purposes
under section 295-615 of the ITAA 1997.
34. A provider that supplies false or misleading information in the
statement commits an offence under sections 8K and 8N of the
TAA 1953, and could be subject to an administrative penalty under
Division 284 in Schedule 1 to the TAA 1953.
Superannuation providers to make payments to the Commissioner
35. Under Part 3A of the S(UMLM) Act, a superannuation provider that
receives a section 20C notice from the Commissioner which has not
been revoked could be required to pay an amount to the Commissioner
in respect of a person identified in the notice [Schedule 1, item
16, section 20D]. The amount payable (if any) by the provider to
the Commissioner is the difference between the starting amount, and
the total of the amounts that have already been paid or are payable
by the provider in respect of the person [Schedule 1, item 16,
subsection 20F(1)].
The starting amount
36. The starting amount is the amount that would have been payable from
the fund to the person identified in the notice under section 20C
of the S(UMLM) Act, if the person could and had requested payment
in connection with their departure from Australia (as a DASP).
[Schedule 1, item 16, subsection 20F(2)]
37. The starting amount is a hypothetical amount that would have been
payable from the fund if a DASP was payable in respect of the
person and a request for payment had been made. The starting
amount is the net of any fees and charges that could be applied by
the provider on a DASP amount.
38. The starting amount must be worked out at the time referred to as
'calculation time'. Calculation time is defined as being the time
immediately before the required time for the provider to make a
payment to the Commissioner because of the notice under section 20C
of the S(UMLM) Act (assuming an amount is payable in respect of the
person) [Schedule 1, item 16, paragraph 20F(2)(a)]. In other
words, the calculation time can be:
. the time that is immediately before the next scheduled
statement day after the notice was given [Schedule 1, item
16, subsection 20F(1) and paragraph 20F(2)(a)];
. if the notice is given less than 28 days before the next
scheduled statement day, the time that is immediately
before the following scheduled statement day [Schedule 1,
item 16, subsection 20F(1) and paragraph 20F(2)(a)]; or
. if the Commissioner has deferred the time the payment is
due and payable (ie, deferred the next scheduled statement
day or the following scheduled statement day), the time
that is immediately before the deferred day [Schedule 1,
item 16, subsection 20F(1) and paragraph 20F(2)(a)].
However, if the provider makes a payment before the required time
the payment is due and payable, the calculation time is the time
that is immediately before the payment is to be made [Schedule 1,
item 16, subparagraph 20F(2)(a)(ii)].
39. If the provider has already paid an amount in respect of the person
before the 'calculation time', then that amount paid is not
included in the starting amount. This is because the amount
already paid would not have been included in a DASP for the person
at the calculation time.
40. In working out the starting amount the provider must assume a DASP
request could be made and is made before the calculation time
[Schedule 1, item 16, paragraph 20F(2)(b)] and that the person has
not died [Schedule 1, item 16, paragraph 20F(2)(c)].
41. Further, when working out the starting amount, the provider must
not notionally withhold the DASP tax that would otherwise apply.
[Schedule 1, item 16, paragraph 20F(4)(a)]
1.
Assume a provider receives a notice under section 20C of the
S(UMLM) Act from the Commissioner identifying Jay as a
departed temporary visa holder. The provider is required to
work out the notional DASP amount in respect of Jay
(assuming Jay could make and has made a DASP request) at the
time immediately before it makes the payment to the
Commissioner. The notional DASP amount excludes amounts
already paid by the provider in respect of Jay. The
notional DASP tax should not be subtracted from the notional
DASP amount, although this amount is net of fees and charges
that would apply to the DASP.
Reduce the starting amount by amounts that are paid / payable in
respect of the person
42. Broadly speaking, the provider must reduce the starting amount in
respect of a person, by the total of any amounts that have already
been paid or become payable in respect of the person. That is, the
starting amount must be reduced by the total of the following
amounts:
. the amount (if any) that is payable by the provider in
respect of the person where the provider is required or
permitted to pay the amount under the Superannuation
(Industry) Supervision Regulations 1994 (SIS Regulations)
or Retirement Savings Accounts Regulations 1997
(RSA Regulations);
. the amount (if any) paid by the provider because the
person has actually died;
. the amount (if any) of the person's superannuation
interest that supports a superannuation income stream; and
. the amount (if any) worked out under the Regulations.
[Schedule 1, item 16, subsection 20F(3)]
43. The time at which the provider must work out the above amounts is
at the 'calculation time'. [Schedule 1, item 16,
subsection 20F(3)]
Amount that is payable under the Superannuation Industry
(Supervision) Regulations 1994 or the Retirement Savings Accounts
Regulations 1997
44. The provider is required to subtract from the starting amount, an
amount where:
. the person has met a condition of release under the
SIS Regulations or the RSA Regulations which requires
(compulsory cashing) or permits (voluntary cashing) the
amount to be paid in respect of the person; and
. there is a requirement on the provider to pay that amount.
[Schedule 1, item 16, paragraph 20F(3)(a)]
45. For instance, if the person has met a compulsory cashing condition
under the SIS Regulations or the RSA Regulations (eg, DASP) and the
provider has received a request for payment, then there is a
requirement on the provider to pay that amount. The starting
amount is reduced by the amount that is payable.
46. Also, if the person has met a voluntary cashing condition under the
SIS Regulations or the RSA Regulations, the provider has received a
request for payment and the rules of the fund allow an amount to be
paid in these circumstances, then there is a requirement on the
provider to pay that amount. The starting amount is reduced by the
amount that is payable.
47. Before the starting amount can be reduced by an amount, the
provider must be more than merely aware that the person has met a
condition of release under the SIS Regulations or the RSA
Regulations, and there must be more than a mere option, in the
circumstances, for the provider to pay the amount in respect of the
person.
48. If, at the calculation time, a provider is in the process of making
a payment in accordance with a condition of release under the
SIS Regulations or the RSA Regulations in respect of the person,
then the starting amount is reduced by the amount of the payment.
In practice, the starting amount would only normally be reduced
when the fund has been requested to make a payment that it is
entitled to make under SIS Regulations or the RSA Regulations and
the fund is in the process of making that payment.
Amounts paid because of death
49. When working out the starting amount, the provider is required to
assume the person in question has not died before the calculation
time [Schedule 1, item 16, paragraph 20F(2)(c)]. Accordingly, if
the person has actually died before this time, the starting amount
must be reduced by any amount paid by the provider because of the
person's death [Schedule 1, item 16, paragraph 20F(3)(b)].
Amounts in the Regulations
50. Regulations could be made to specify other amounts that are to be
reduced from the starting amount [Schedule 1, item 16, paragraph
20F(3)(d)]. Where other amounts are specified in the Regulations,
this could result in the remaining amount that is payable (if any)
to the Commissioner being less than the starting amount.
51. In working out how much of the starting amount is to be reduced,
the provider must not notionally withhold the DASP tax that may
otherwise apply [Schedule 1, item 16, paragraph 20F(4)(a)]. For
instance, if the provider has received a DASP request from the
person, then the starting amount is to be reduced by the gross DASP
amount and not by the net DASP amount (after the DASP tax has been
withheld).
1.
A provider of a regulated superannuation fund (that is not
an unfunded public sector superannuation scheme) has
received a DASP request in respect of Catherine (who has
been identified in a section 20C notice). The starting
amount for Catherine at the calculation time is $5,000.
This is to be reduced by the amount that is required to be
paid to Catherine in accordance with the SIS Regulations,
without subtracting the notional DASP tax amount.
The remainder is the amount payable to the Commissioner
52. Where there is an amount remaining, after the starting amount for a
person has been reduced by the total amount paid or payable (if
any) in respect of the person, the provider must pay the remainder
to the Commissioner. [Schedule 1, item 16, subsection 20F(1)]
53. The remaining amount must be paid to the Commissioner by the end of
the next scheduled statement day after the notice under section 20C
of the S(UMLM) Act was given to the provider [Schedule 1, item 16,
subsection 20F(1)(a)]. However, if the notice was given to the
provider less than 28 days before that day, the payment is due and
payable to the Commissioner by the end of the following scheduled
statement day [Schedule 1, item 16, subsection 20F(1](b)].
1.
Assume the scheduled statement days for each year are 1 May
and 1 November. A superannuation provider works out that an
amount is payable in respect of Jay who has been identified
in a section 20C notice given to the provider on 25
September in a year. The provider is required to pay the
amount by the end of 1 November of that year.
However, if the notice was given by the Commissioner to the
provider on 18 October in that year, the provider must pay
the amount to the Commissioner by the end of 1 May of the
following year.
54. The Commissioner can defer the time at which amounts are due and
payable under section 255-10 in Schedule 1 to the TAA 1953.
55. A provider that fails to pay an amount that is payable to the
Commissioner by the time required, is liable for a general interest
charge on the unpaid amount [Schedule 1, item 16, subsection
20F(5)]. As well, the amount payable by a provider to the
Commissioner is a tax-related liability under the TAA 1953 with the
associated administrative penalties under Division 284 in Schedule
1 to the TAA 1953.
56. In addition, an offence is committed if, as a result of an act or
omission, an amount that is payable (refer to paragraph 1.52) to
the Commissioner is not paid by the required time [Schedule 1, item
16, section 8 and subsection 20F(6)]. Where the act or omission is
engaged by an individual, the maximum penalty for the offence is
100 penalty units (and five times greater if the act or omission is
engaged by a body corporate under the Crimes Act 1914).
57. In working out whether there is an amount payable to the
Commissioner, in respect of a person where their superannuation
interest is subject to a payment split under the Family Law Act
1975, the provider can only take into account the person's
entitlement to payment after the payment split. [Schedule 1, item
16, paragraph 20F(4)(b)]
58. A provider that pays the whole amount that is payable by the time
required under Part 3A of the S(UMLM) Act is discharged from any
further liability in respect to the amount paid. [Schedule 1, item
16, section 20G]
59. Where the revocation of a notice under section 20C of the S(UMLM)
Act has effect (refer to paragraph 1.20), no amount becomes payable
to the Commissioner in respect of the person identified in
connection with the notice. [Schedule 1, item 16, subsection
20J(3)]
Refund of overpayments made by superannuation providers
60. If a superannuation provider has made a payment because of a notice
under section 20C of the S(UMLM) Act in respect of a person, and
the Commissioner is satisfied that the amount paid exceeded the
amount that was payable (if any) in connection with the notice in
respect to the person, then the Commissioner must pay the excess to
the provider of the originating fund (or to the provider of the
successor fund if the original fund no longer exists). [Schedule
1, item 16, section 20K]
61. For instance, if a provider has paid too much in respect of a
person and the Commissioner is satisfied that the provider was not
required to pay the excess amount in respect of the person (ie, the
provider worked out the wrong amount that was payable), then the
Commissioner must refund that excess to the provider.
62. Similarly, if the amount paid by a provider in respect of a person
is not the person in fact identified in the notice (ie, the
provider has made a payment in respect of the wrong person), then
the Commissioner must refund that payment to the provider if
satisfied the provider was not required to make a payment in
respect of that person.
1.
A provider paid $150,000 in respect of member Catherine who
was identified in a notice under section 20C of the S(UMLM)
Act given by the Commissioner. However, the amount payable
to the Commissioner in respect of Catherine was in fact only
$100,000, and the Commissioner is satisfied that the
provider was not required to pay the additional $50,000 in
respect of Catherine, the Commissioner must pay the $50,000
to the provider (or to the provider of the successor fund if
the original fund no longer exists).
Assume a provider paid $150,000 in respect of member Lola to
the Commissioner because of a section 20C notice. However,
the notice in fact identified a different member of the
fund, Lili. If the Commissioner is satisfied that the
provider was not required to pay the $150,000 in respect of
Lola, the Commissioner must pay the $150,000 to the provider
(or the provider of the successor fund if the original fund
no longer exists).
63. If a notice given under section 20C of the S(UMLM) Act wrongly
identifies a person as someone that such a notice must be given in
respect of, and the provider makes a payment to the Commissioner
because of the notice, the Commissioner can refund that payment to
the provider if the Commissioner is satisfied the person was
someone in respect of who such notice should not have been given.
64. Money is appropriated under section 16 of the TAA 1953 to refund
overpayments made to the Commissioner.
Application and transitional provisions
65. A notice from the Commissioner under section 20C of the S(UMLM) Act
can identify a person who, before, on or after the commencement of
Schedule 1 to the main Bill, has held a temporary visa (which is
not a visa prescribed by the Regulations) that has ceased to be in
effect and who has left Australia.
66. The requirements for a statement and a payment to be given by a
provider to the Commissioner, apply from the commencement of
Schedule 1 to the main Bill.
Chapter 2
Payment of unclaimed superannuation from the Commissioner of Taxation
Outline of chapter
67. This chapter outlines the rules in Part 3A of the Superannuation
(Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) (inserted
by Part 1 of Schedule 1 to the Temporary Residents' Superannuation
Legislation Amendment Bill 2008 (main Bill)) which allow departed
temporary visa holders to claim back their unclaimed superannuation
from the Commissioner of Taxation (Commissioner).
68. All references to legislative provisions in this chapter are
references to the main Bill unless otherwise stated.
Context of amendments
69. Where the Commissioner has received an amount in respect of a
person from a superannuation provider under the S(UMLM) Act, the
amount can be later claimed back in respect of the person (subject
to any withholding tax that may apply).
70. A person who used to be the holder of a temporary visa that expired
or was cancelled (ie, their visa ceased to be in effect) and has
left Australia, is able to withdraw their superannuation from a
fund in connection with their departure by requesting a departing
Australia superannuation payment (DASP). The superannuation
provider for the fund is required to pay the benefits to the person
within 28 days of the request (less the relevant amount of DASP
withholding tax). The DASP withholding tax recovers some of the
superannuation tax concessions provided to the departed temporary
visa holder. As explained in Chapter 1, Part 3A of the S(UMLM) Act
requires the superannuation provider to pay the departed temporary
visa holder's superannuation to the Commissioner in certain
circumstances.
71. Part 3A of the S(UMLM) Act also requires the Commissioner to pay
back the unclaimed superannuation it has received from a provider
in respect of a person (subject to any withholding tax that may
apply).
Summary of new law
Payments from the Commissioner
72. Generally, if the Commissioner has received an amount under the
S(UMLM) Act for a person and the person was a departed temporary
visa holder, then those amounts can be claimed back (subject to any
withholding tax that may apply).
73. The Commissioner must pay an amount in respect of a person under
Part 3A of the S(UMLM) Act if the Commissioner is satisfied that
all of the following conditions have been met:
. the Commissioner has received an amount from a
superannuation provider in respect of the person under the
S(UMLM) Act;
. the person was identified in a notice under section 20C of
the S(UMLM) Act, or was previously a holder of a temporary
visa (apart from a visa prescribed in the Superannuation
(Unclaimed Money and Lost Members) Regulations 1999
(Regulations)) that ceased to be in effect at least six
months earlier and they had left Australia at least six
months earlier after starting to be the holder of the
visa; and
. the amounts received under the S(UMLM) Act in respect of
the person exceed the total of any amount that has already
been paid by the Commissioner in respect of the person
under the S(UMLM) Act.
74. Where the Commissioner is satisfied that an amount is payable in
respect of a person, the Commissioner can pay the amount to the
person, to the person's legal personal representative (if the
person has died), or to a single fund (if the person so directs and
if the Commissioner is satisfied they are an Australian citizen,
New Zealand citizen or the holder of a permanent visa or a visa
prescribed by the Regulations).
75. The excess paid by the Commissioner is generally a DASP and the
DASP tax is withheld by the Commissioner at the time of payment.
Recovering and returning payments made by the Commissioner
76. The Commissioner can recover the amount that was paid under Part
3A of the S(UMLM) Act in respect of a person if it exceeds the
amount that should have been paid in respect to that person under
that Part.
77. The whole or part of the overpayment can be recovered from the
person ('debtor') to whom the payment was made. That 'debtor' may
include the departed temporary visa holder, their legal personal
representative, a beneficiary, the superannuation provider of the
fund the overpayment was made to or another fund which received a
transfer of the amount. The Commissioner must give a notice of
recovery to the debtor.
78. A provider that receives a payment from the Commissioner under Part
3A of the S(UMLM) Act in respect of a person and has not credited
the amount into an account for that person within 28 days of the
Commissioner's payment, is liable to return the payment to the
Commissioner.
Detailed explanation of new law
Payment by the Commissioner
79. The Commissioner is required to pay an amount in respect of a
person if satisfied, on application in the approved form or on the
initiative of the Commissioner (refer to paragraph 2.14), that both
of the following preconditions have been met:
. the person has [Schedule 1, item 16, paragraph 20H(1)(a)]:
- been identified in a notice under section 20C of the
S(UMLM) Act; or
- held a temporary visa (except a visa prescribed in the
Regulations) and at least a continuous period of
six months has passed since both the visa ceased to be
in effect and the person left Australia (after
starting to hold the visa); and
. the sum of the amounts received by the Commissioner in
respect of the person under the S(UMLM) Act, exceeds the
sum of the amounts paid by the Commissioner in respect of
the person under the S(UMLM) Act [Schedule 1, item 16,
paragraph 20H(1)(b)].
Preconditions for making a payment
Upon application or on the Commissioner's own initiative
80. An application for payment in respect of a person can be made by
the person or on behalf of the person (for instance, by the
person's legal personal representative where the person has died).
While the application should be made in the approved form, it can
also be made in a form that contains the necessary information to
enable the Commissioner to determine if there is an amount payable
in respect of the person and where the payment is to be made.
[Schedule 1, item 16, subsection 20H(1)]
81. Alternatively, if the Commissioner is satisfied there is enough
information to determine an amount is payable in respect of a
person, and where that payment is to be made, the payment can be
made on the Commissioner's own initiative without an application in
the approved form being made. [Schedule 1, item 16, subsection
20H(1)]
The person has been identified in a section 20C notice or was a
departed temporary visa holder
82. For a payment to be made by the Commissioner under Part 3A of the
S(UMLM) Act in respect of a person, the person must [Schedule 1,
item 16, paragraph 20H(1)(a)]:
. be identified in a notice under section 20C of the
S(UMLM) Act; or
. have held a temporary visa (except a visa prescribed in
the Regulations) and at least a continuous period of six
months has passed since both the visa ceased to be in
effect and the person left Australia after starting to
hold the visa.
The inclusion of the second dot point ensures that DASP tax may be
applied to any unclaimed superannuation of a person who is a
departed temporary visa holder even if they have not been
identified in a notice under section 20C of the S(UMLM) Act.
[Schedule 1, item 16, subparagraph 20H(1)(a)(ii)]
83. The Regulations could prescribe certain classes of temporary visa
holders who would then be able to claim back their unclaimed
superannuation under section 17 of the S(UMLM) Act rather than
under Part 3A as a DASP [Schedule 1, item 16, subparagraph
20H(1)(a)(ii)]. A person who has superannuation paid to the
Commissioner under section 17 of the S(UMLM) Act and who is not
able to claim it back under Part 3A (because they do not fall under
one of the dot points in paragraph 2.16), can claim back their
money under section 17 of the S(UMLM) Act.
There is an excess amount for the person
84. The Commissioner is only required to make a payment in respect of a
person if there is an excess amount worked out under section 20H of
the S(UMLM) Act. There is an excess amount if the total amount
paid to the Commissioner for the person exceeds the total amount
paid by the Commissioner in respect of the person. [Schedule 1,
item 16, paragraph 20H(1)(b)]
85. The excess amount is worked out by first calculating the total
amount received by the Commissioner under the S(UMLM) Act in
respect of the person [Schedule 1, item 16, paragraph 20H(1)(b)].
This total amount could have been paid to the Commissioner under:
. section 17 of the S(UMLM) Act, before, on or after the
commencement of Part 3A of the S(UMLM) Act;
. Part 3A of the S(UMLM) Act; or
. both section 17 and Part 3A of the S(UMLM) Act.
86. The total amount paid to the Commissioner under the S(UMLM) Act in
respect of the person, must then be reduced by the total amount
paid by the Commissioner in respect of the person under the S(UMLM)
Act [Schedule 1, item 16, paragraph 20H(1)(b)]. These amounts could
have been paid by the Commissioner in respect of the person under:
. section 17 of the S(UMLM) Act, before, on or after the
commencement of Part 3A of the S(UMLM) Act;
. Part 3A of the S(UMLM) Act (as a payment and/or as a
refund for overpayment); or
. both section 17 and Part 3A of the S(UMLM) Act.
The excess amount (if any) is payable by the Commissioner in
respect of the person.
87. The Commissioner must take account of payments made by the
Commissioner under the S(UMLM) Act in respect of the person (the
departed temporary visa holder), including a payment made to a
claimant (such as the person's legal personal representative or a
beneficiary), when determining whether there is an excess amount
payable in respect of the person.
Subject to any withholding tax
88. A payment from the Commissioner in respect of a person under
section 20H of the S(UMLM) Act is generally a DASP (refer to
paragraph 3.34). The DASP tax is withheld by the Commissioner from
the excess amount at the time of payment [Schedule 1, item 16,
subsection 20H(6)]. If applicable, the excess untaxed roll-over
amount tax is withheld by the Commissioner from the excess amount
at the time of payment to a fund (refer to paragraph 3.48)
[Schedule 1, item 16, subsection 20H(6)]. The amount withheld from
the payment is taken to have been paid by the Commissioner
[Schedule 1, item 16, subsection 20H(5)].
Interaction with section 17 of the Superannuation (Unclaimed Money
and Lost Members) Act 1999
89. An amount of unclaimed money which the Commissioner has paid under
Part 3A of the S(UMLM) Act, or has taken into account in
determining whether an amount is payable under Part 3A in respect
of a person, cannot be paid under section 17 of the S(UMLM) Act in
respect of that person. [Schedule 1, item 16, subsection 17(2A)]
90. That is, where the Commissioner is required to make a payment under
Part 3A in respect of a person, then the Commissioner must make
that payment under Part 3A and not under section 17. The
requirement for the Commissioner to make a payment under Part 3A
overrides the requirement for the Commissioner to make a payment
under section 17 in respect to that person.
1.
Catherine has not been identified in a notice under section
20C of the S(UMLM) Act from the Commissioner but her
superannuation has been paid to the Commissioner by her fund
as unclaimed money under subsection 12(1) of the S(UMLM)
Act. Catherine had previously entered into Australia on a
temporary visa and departed Australia after her visa had
expired for more than six months. Catherine has applied to
claim back her unclaimed superannuation from the
Commissioner (assume that no previous application has been
made on her behalf). The Commissioner is required to pay
the unclaimed superannuation for Catherine under Part 3A of
the S(UMLM) Act. The payment is a DASP and the Commissioner
is required to withhold the DASP tax from the payment.
Destination of the payment
91. Where an excess amount is payable by the Commissioner in respect of
a person, the Commissioner must pay the excess (as a single lump
sum payment) to one of the following:
. the person;
. the person's legal personal representative if the person
has died; or
. to a single fund that is a complying superannuation plan,
if the person so directs and the person is an Australian
or New Zealand citizen or the holder of a permanent visa
or visa prescribed in the Regulations.
[Schedule 1, item 16, subsection 20H(2)]
92. However, if the person has died and the Commissioner is satisfied
that a superannuation provider would have been required to pay the
person's superannuation to their death beneficiaries (had the
amount not been paid by the provider to the Commissioner under the
S(UMLM) Act), then the Commissioner must pay the amount to the
death beneficiaries if the Commissioner has the necessary
information to make the payment. [Schedule 1, item 16, subsection
20H(3)]
93. The amount payable by the Commissioner to each death beneficiary is
equal to the amount the Commissioner is satisfied that a provider
would have been required to pay each death beneficiary if the
benefits had remained in the fund. If this amount is more than the
excess amount payable in respect of the deceased person (as worked
out under section 20H of the S(UMLM) Act - refer to paragraph
2.18), then the amount payable by the Commissioner to each death
beneficiary is to be worked out according to the following formulae
[Schedule 1, item 16, subsection 20H(4)]:
Excess amount × Amount payable from provider to the death
beneficiary
Total amount payable from provider to all death beneficiaries
1.
Unclaimed money has been paid by a provider to the
Commissioner in respect of Mika under subsection 12(1) of
the S(UMLM) Act. Assume Mika has died before the
Commissioner is required to make a payment in respect of him
under Part 3A of the S(UMLM) Act. The Commissioner must pay
the amount to Mika's nominated death beneficiaries (if the
Commissioner has this information) or to Mika's legal
personal representative (if no beneficiary has been
nominated or the Commissioner does not have information
about the nominated beneficiaries). The amount payable to a
nominated death beneficiary is worked out according to the
formula in paragraph 2.27, whilst the amount payable to the
legal personal representative is the excess amount.
94. A person who is dissatisfied with a decision of the Commissioner
relating to a payment made under section 20H of the S(UMLM) Act,
including the amount paid by the Commissioner and/or the
destination of the payment, can object to the decision under Part
IVC of the Taxation Administration Act 1953 (TAA 1953) [Schedule 1,
item 16, section 20P]. A 'person' includes the person to whom the
amount belongs, the person's legal personal representative or a
beneficiary.
95. Money is appropriated under section 16 of the TAA 1953 for the
Commissioner to make payments under Part 3A of the S(UMLM) Act.
Recovery of overpayments by the Commissioner
96. The Commissioner is able to recover a payment made in respect of a
person under Part 3A of the S(UMLM) Act which exceeds the amount
that should have been paid in respect of the person under that Part
[Schedule 1, item 16, subsection 20L(1)]. The Commissioner is also
able to recover the payment if no amount should have been paid in
respect of the person under Part 3A.
1.
Assume the Commissioner made a payment in respect of Jay
under Part 3A of the S(UMLM) Act, of $20,000 (after the DASP
tax is withheld). However, the actual amount payable in
respect of Jay is in fact $15,000 (after the DASP tax is
withheld). The Commissioner can recover the excess amount of
$5,000.
Assume the Commissioner made a payment in respect of
Catherine under Part 3A of the S(UMLM) Act, of $20,000
(after the DASP tax is withheld). However, no amount was in
fact payable in respect of Catherine under Part 3A. The
Commissioner can recover the entire amount of $20,000.
97. The Commissioner can recover the overpayment from any 'debtor'. A
debtor is defined as:
. a person (this includes the person the payment is made in
respect of, their legal personal representative or their
beneficiary);
. the superannuation provider of the fund the payment was
directed to by the person; and/or
. the superannuation provider which the whole or part of the
payment was transferred to by another provider.
[Schedule 1, item 16, subsection 20L(3)]
98. Before recovering the overpayment the Commissioner must give the
debtor a written notice about the proposed recovery and specify the
amount to be recovered [Schedule 1, item 16, paragraph 20L(4)(a)].
The Commissioner must allow at least 28 days after the notice is
given before taking action to recover the overpayment [Schedule 1,
item 16, paragraph 20L(4)(b)].
99. The notice is not a legislative instrument within the definition of
section 5 of the Legislative Instruments Act 2003 because it does
not have a legislative character which determines or alters the
content of the law; it is merely declaratory of the law and causes
the law to be applied. [Schedule 1, item 16, subsection 20L(8)]
100. The Commissioner is able to revoke a notice about a proposed
recovery. [Schedule 1, item 16, subsection 20L(6)]
101. The Commissioner can only recover the whole or part of an
overpayment from a provider if the provider still holds an amount
attributable to the overpayment at the time the notice was given to
them. [Schedule 1, item 16, subsection 20L(5)]
102. An amount that is sought to be recovered by the Commissioner from
the debtor is a debt due to the Commonwealth [Schedule 1, item 16,
subsection 20L(2)]. The Commissioner may commence debt recovery
action against a debtor or debtors.
103. While the total amount which the Commissioner can seek to recover
from different debtors can be more than the actual amount of the
overpayment, the total amount that is actually recovered by the
Commissioner cannot be more than the actual amount of the
overpayment [Schedule 1, item 16, subsection 20L(7)]. Further, the
amount which is actually recovered cannot be more than the amount
specified in the notice of recovery [Schedule 1, item 16, paragraph
20L(4)(c)].
Return of payments by superannuation providers
104. If the Commissioner makes a payment in respect of a person on the
direction of the person to a fund, and the superannuation provider
of that fund has not credited the payment to an account within 28
days after the payment was made, then the provider must return that
payment to the Commissioner. [Schedule 1, item 16, subsections
20M(1) and (2)]
105. The provider is liable to repay the payment to the Commonwealth by
the end of 28 days after the day the Commissioner had made the
payment to the provider. [Schedule 1, item 16. subsection 20M(2)]
106. When repaying the payment, the provider must provide certain
information relating to the payment, in the approved form, to the
Commissioner [Schedule 1, item 16, subsection 20M(3)]. For
instance, the information can relate to the tax components of the
payment. The provider commits an offence and could be subject to
administrative penalties under the TAA 1953 if it fails to do so.
107. A superannuation provider that does not repay the whole amount of
the payment to the Commissioner by the end of the 28th day after
the Commissioner has made the payment to the provider, is liable to
pay a general interest charge on the unpaid amount. [Schedule 1,
item 16, subsection 20M(4)]
Application and transitional provisions
108. Payments from the Commissioner, the recovery of overpayments by the
Commissioner and the return of payments to the Commissioner under
Part 3A of the S(UMLM) Act, all apply from the commencement of
Schedule 1 to the main Bill.
Chapter 3
Other changes
Outline of chapter
109. This chapter outlines other amendments to the Superannuation
(Unclaimed Money and Lost Members) Act 1999 (S(UMLM) Act) and the
amendments to related tax legislation, under Schedule 1 to the
Temporary Residents' Superannuation Legislation Amendment Bill 2008
(main Bill) and Schedule 1 to the Superannuation (Departing
Australia Superannuation Payments Tax) Amendment Bill 2008 (DASPT
Bill). These amendments are necessary to administer the key rules
in Part 3A of the S(UMLM) Act (as outlined in Chapters 1 and 2).
110. All references to legislative provisions in this chapter are
references to the main Bill unless otherwise stated.
Context of amendments
111. Part 1 of Schedule 1 to the main Bill contains amendments to the
S(UMLM) Act (including the inserting of Part 3A) to implement this
measure.
112. For the purposes of administering Part 3A of the S(UMLM) Act, and
for purposes related to temporary visa holders' superannuation,
Part 2 of Schedule 1 to the main Bill amends the Taxation
Administration Act 1953 (TAA 1953) while Part 3 of Schedule 1 to
the main Bill amends the Income Tax Assessment Act 1997 (ITAA
1997).
113. Schedule 1 to the DASPT Bill amends the Superannuation (Departing
Australia Superannuation Payments Tax) Act 2007 to implement this
measure and to facilitate the administration of Part 3A of the
S(UMLM) Act.
Summary of new law
Other changes to the Superannuation (Unclaimed Money and Lost
Members) Act 1999
114. Amendments are made to the S(UMLM) Act to facilitate the
administration of the rules contained in Part 3A, including the
quotation and use of tax file numbers, the disclosure of
information between central agencies to administer the measure, and
the interaction between Part 3 and Part 3A.
115. The S(UMLM) Act also clarifies that amounts paid to the
Commissioner of Taxation (Commissioner) under the S(UMLM) Act are
not held on trust by the Commissioner and are not special public
money under the Financial Management and Accountability Act 1997.
Changes to related tax legislation
116. A payment from the Commissioner under section 20H of the S(UMLM)
Act is a superannuation benefit under the ITAA 1997. The ITAA 1997
sets out how to work out the tax-free component and the taxable
component of the payment that is a superannuation benefit.
117. Under the TAA 1953, amounts that are payable or repayable to the
Commissioner by a provider under Part 3A of the S(UMLM) Act, are a
tax-related liability. Further, a general interest charge accrues
on any unpaid amount after the time it becomes due and payable.
118. The departing Australia superannuation payment (DASP) withholding
tax rates on elements of the taxable component are raised by five
percentage points to recover some of the superannuation tax
concessions provided to departed temporary visa holders. The DASP
withholding tax is not applied on amounts which are subject to the
excess untaxed roll-over amounts tax.
Detailed explanation of new law
Other changes to the Superannuation (Unclaimed Money and Lost Members) Act
1999
Preliminaries
119. The long title of the S(UMLM) Act is amended to more accurately
reflect what the legislation broadly aims to achieve. The
legislation provides a register of unclaimed money and a register
of lost members, and provides for certain payments relating to
superannuation and for related purposes.
120. The objects provision at section 6 and the outline at section 7 of
the S(UMLM) Act are amended to include a summary of the key rules
in Part 3A of the S(UMLM) Act.
Interaction between Part 3 and Part 3A of the S(UMLM) Act
Statements from superannuation providers
121. A superannuation provider is currently required under section 16 of
the S(UMLM) Act to give the Commissioner a statement of 'unclaimed
money' it holds for a member as described under sections 12 or 14
of the S(UMLM) Act. If, at the end of a half-year reporting
period, a provider holds unclaimed money for a person under
subsection 12(1) of the S(UMLM) Act (member reached age 65) and the
provider is also required to give a statement under Part 3A of the
S(UMLM) Act in respect of that person, then the provider is not
required to give a statement under section 16 of the S(UMLM) Act to
the Commissioner in respect of the person [Schedule 1, item 13,
subsection 16(7)]. The provider does not commit an offence under
subsection 16(5) of the S(UMLM) Act in complying with Part 3A of
the S(UMLM) Act.
122. However, a provider that holds unclaimed money for a person under
subsection 12(2) (splittable payments) or section 14 (death) of the
S(UMLM) Act, is still required to comply with the reporting
requirements under section 16 of the S(UMLM) Act. This is
necessary because Part 3A of the S(UMLM) Act should not apply to a
non-member spouse entitled to the splittable payments as the non-
member spouse is not a person with an interest in the fund for the
purposes of Part 3A of the S(UMLM) Act.
123. Further, the Commissioner is unlikely to be aware of the death of a
departed temporary visa holder. If a provider is aware of a
departed temporary visa holder member's death, the provider is
required to deal with the deceased person's superannuation under
Part 3 of the S(UMLM) Act (ie, the deceased member's benefits are
paid to the Commissioner as unclaimed money if section 14 of the
S(UMLM) Act is met).
Payments from superannuation providers
124. A provider who is not required to give a statement under section 16
of the S(UMLM) Act in respect to a person is not required to
specify an amount in a statement for the purposes of section 17 of
the S(UMLM) Act. Accordingly, the provider is not required to pay
that unclaimed money amount to the Commissioner under section 17 of
the S(UMLM) Act in these circumstances [Schedule 1, item 14,
subsection 17(1)]. The provider does not commit an offence under
subsection 17(6) in complying with Part 3A of the S(UMLM) Act.
125. However, a provider that holds unclaimed money for a person under
subsection 12(2) (splittable payments) or section 14 (death) of the
S(UMLM) Act, is still required to comply with its payment
obligations under section 17 of the S(UMLM) Act.
1.
A superannuation provider has unclaimed money for member
Shaz under subsection 12(1) of the S(UMLM) Act for the half
year ending on 31 December. The provider receives a notice
under section 20C of the S(UMLM) Act on 25 February of the
following year in respect of Shaz. The provider is required
to give a statement in the approved form with the required
information, to the Commissioner by the end of 1 May of that
year (assuming that the next scheduled statement day after
the notice was given is 1 May). The provider is also
required to work out the amount (if any) payable in respect
of Shaz under Part 3A of the S(UMLM) Act, and pay this
amount to the Commissioner by the end of 1 May. The
provider is not required to also give a statement and make a
payment in respect of Shaz under sections 16 and 17 of the
S(UMLM) Act in these circumstances.
Statements and payments from superannuation providers where Part 3A
does not apply
126. A provider that holds unclaimed money for a person under sections
12 or 14 of the S(UMLM) Act and has not been given a notice under
section 20C of the S(UMLM) Act in respect of the person, is
required to comply with the requirements under Part 3 of the
S(UMLM) Act. This includes giving a statement and paying unclaimed
money to the Commissioner in respect of the person under sections
16 and 17 of the S(UMLM) Act.
Payments from the Commissioner
127. Where the Commissioner has received an amount under both section 17
and Part 3A of the S(UMLM) Act in respect of a person, and the
Commissioner is required to make a payment in respect of the
person, the Commissioner is then required to make the payment under
Part 3A and not under section 17 of the S(UMLM) Act. [Schedule 1,
item 15, subsection 17(2A)]
Disclosure of information
128. In broad terms, Part 3A of the S(UMLM) Act allows for the
disclosure of migration and citizenship information by central
agencies for the purposes of administrating the measure. More
specifically, Part 3A of the S(UMLM) Act contains a provision which
permits the disclosure of certain information (refer to paragraph
3.21), by certain persons (refer to paragraph 3.22), for certain
purposes (refer to paragraph 3.23) [Schedule 1, item 16,
section 20N].
129. The information that can be disclosed can relate to any of the
following matters:
. whether a person is or was the holder of a visa at a
particular time or during a particular period;
. whether a person is or was an Australian or New Zealand
citizen at a particular time or during a particular
period;
. whether a person left Australia at a particular time or
during a particular period;
. whether at a particular time or during a particular period
a person has made a valid application for a permanent
visa; and/or
. confirmation, by reference to any employment of, or work
done by, a person, that they are the same person as a
particular person who is or was the holder of a temporary
visa at a particular time or in a particular period.
[Schedule 1, item 16, subsection 20N(4)]
130. Persons who are permitted to disclose relevant information (refer
to paragraph 3.21) are the Secretary and Australian public service
employees of a department administered by a Minister responsible
for administering a provision in the Migration Act 1958 or the
Australian Citizenship Act 2007. [Schedule 1, item 16,
subsection 20N(2)]
131. A permitted person (refer to paragraph 3.22) must only disclose
relevant information (refer to paragraph 3.21) for the purposes of
administering the S(UMLM) Act and/or related tax legislation (the
TAA 1953, the Superannuation (Departing Australia Superannuation
Payments Tax) Act 2007 and the ITAA 1997). [Schedule 1, item 16,
subsection 20N(3)]
132. For instance, it allows a department (administered by a Minister
responsible for administering a provision in the Migration Act 1958
or the Australian Citizenship Act 2007) to disclose information
relating to the employment of a temporary visa holder to the
Commissioner. The Commissioner can then compare this information
with information the Commissioner has obtained from other sources
to confirm that the person is the same person to be identified in a
notice under section 20C of the S(UMLM) Act, before sending out the
notice to a superannuation provider.
133. Part 6 of the S(UMLM) Act allows certain persons (which includes
the Commissioner and officers and employees of an agency
responsible for administering the S(UMLM) Act) to obtain and
disclose information for the purposes of administering the
S(UMLM) Act in the course of their duties. This includes
disclosure to superannuation providers to facilitate the operation
of Part 3A of the S(UMLM) Act.
134. For instance, this may involve the Commissioner obtaining migration
and citizenship information from another department (which is
responsible for administering a provision in the Migration Act 1958
or the Australian Citizenship Act 2007) and including that
information in a notice under section 20C of the S(UMLM) Act to a
superannuation provider.
Tax file numbers
135. A notice from the Commissioner under section 20C of the S(UMLM) Act
to a superannuation provider may contain the tax file number of a
person and of the fund. [Schedule 1, item 18, section 25A]
136. A statement in the approved form from a provider to the
Commissioner under Part 3A of the S(UMLM) Act may contain the tax
file number of the provider, of the fund and of the person
identified in a notice under section 20C of the S(UMLM) Act (if it
is quoted to the provider or in the notice) [Schedule 1, item 17,
subsection 25(2A)]. A notice containing the tax file number of a
member is taken to be quoted for superannuation purposes under
section 295-615 of the ITAA 1997.
137. The Commissioner can request the tax file number of a person to be
quoted (for the purposes of administering the S(UMLM) Act or the
Superannuation (Unclaimed Money and Lost Members) Regulations 1999
(Regulations)) from the following:
. someone who claims to be entitled to a payment under the
S(UMLM) Act;
. someone who claims to be a lost member; or
. someone who claims to be entitled to a payment under the
S(UMLM) Act and a lost member.
[Schedule 1, item 20, paragraph 29(1)(aa)]
However, a person who refuses to quote their tax file number to the
Commissioner is not prevented from being paid an amount (if any)
that is payable under Part 3A of the S(UMLM) Act. [Schedule 1,
item 21, subsection 29(4)]
138. For clarification, an amount paid to the Commissioner under the
S(UMLM) Act is not held on trust by the Commissioner and it is not
special public money under the Financial Management and
Accountability Act 1997. [Schedule 1, item 22, section 49]
Changes to the Income Tax Assessment Act 1997
Nature of payments from the Commissioner
139. A payment from the Commissioner under section 20H of the
S(UMLM) Act is:
. a 'superannuation benefit' under section 307-5 of the
ITAA 1997 [Schedule 1, items 31 and 32, subsection 307-
5(1), item 5 in the table];
. an 'unclaimed money payment' under section 307-5 of the
ITAA 1997 [Schedule 1, items 31 and 32, subsection 307-
5(1), item 5 in the table]; and
. in some circumstances, a 'departing Australia
superannuation payment' (DASP) under section 301-170 of
the ITAA 1997 [Schedule 1, item 30, subsections 301-170(2)
to (4)].
Payment is a superannuation benefit
140. A payment from the Commissioner under section 20H of the
S(UMLM) Act is a 'superannuation member benefit' under the
ITAA 1997 if it is paid otherwise than because of the death of a
person, and it is a 'superannuation death benefit' under the ITAA
1997 if it is paid because of the death of a person. [Schedule 1,
items 31 and 32, subsection 307-5(1), item 5 in the table]
141. A payment from a provider to the Commissioner because of a notice
under section 20C of the S(UMLM) Act is also a superannuation
benefit because of sections 307-5 and 307-15 of the ITAA 1997
[Schedule 1, item 31, subsection 307-5(1), item 5 in the table].
However, this payment is not a 'roll-over superannuation benefit'
as defined under section 306-10 of the ITAA 1997 because the
benefit is not paid to a complying superannuation plan nor is it
paid to an entity to purchase a superannuation annuity from the
entity. The payment is non-assessable and non-exempt income
because of section 306-20 of the ITAA 1997.
Payment is a departing Australia superannuation payment
142. Generally, a payment from the Commissioner under section 20H of the
S(UMLM) Act can be a DASP under the ITAA 1997 [Schedule 1, item 30,
subsection 301-170(2)]. This is because the payment is made in
respect of a person who is or was a departed temporary visa holder.
Under section 301-175 of the ITAA 1997, the payment is subject to
the DASP withholding tax. The DASP withholding tax is withheld by
the Commissioner at the time of payment.
143. However, a payment by the Commissioner under section 20H of the
S(UMLM) Act is not a DASP (and therefore not subject to the DASP
withholding tax), if the Commissioner is satisfied at the time of
the payment, that:
. the person has not held a temporary visa;
. at least a continuous period of six months have not passed
since both the person's temporary visa ceased to be in
effect and they left Australia; or
. the payment is prescribed by the Regulations as not a
DASP.
[Schedule 1, item 30, subsections 307-170(3) and 301-170(4)]
This allows, for example, the Commissioner, who is required by the
S(UMLM) Act to make a payment under section 20H (refer to Chapter
2) but is also satisfied that the person should not have been
originally identified in a notice under section 20C of the S(UMLM)
Act, to still make a payment in respect of the person and not have
to apply the DASP withholding tax.
Components of a payment that is a superannuation benefit
144. The rules to work out the tax components of a superannuation
benefit that is a payment from the Commissioner under section 20H
of the S(UMLM) Act, are set out under Subdivision 307-C of the ITAA
1997 [Schedule 1, item 34, paragraph 307-120(2)(e)]. Like any
other superannuation benefit, a payment from the Commissioner can
consist of a 'tax-free component' and a 'taxable component'
[Schedule 1, item 35, subsection 307-142(1)].
145. The tax-free component of the payment is the total of the tax-free
components of the amounts paid to the Commissioner (that are
included in the Commissioner's payment) by superannuation providers
under the S(UMLM) Act [Schedule 1, item 35, subsection 307-142(2)].
The amounts paid to the Commissioner can be under section 17
and/or under Part 3A of the S(UMLM) Act.
146. The taxable component of the payment is the total of the taxable
components of the amounts paid to the Commissioner (that are
included in the Commissioner's payment) by superannuation providers
under the S(UMLM) Act [Schedule 1, item 35, subsection 307-142(3)].
The amounts paid to the Commissioner can be under section 17
and/or under Part 3A of the S(UMLM) Act.
1.
Assume an amount of $10,000 has been paid to the
Commissioner in respect of Jay under Part 3A of the S(UMLM)
Act, with the tax-free component of the amount equal to
$3,000 and the taxable component equal to $7,000. A further
amount of $8,000 was earlier paid to the Commissioner in
respect of Jay under section 17 of the S(UMLM) Act, with the
tax-free component of that amount equal to $2,000 and the
taxable component equal to $6,000. Assume the Commissioner
is required to make a payment in respect of Jay and there is
an amount payable under Part 3A of the S(UMLM) Act.
Further, assume no previous amount has been paid by the
Commissioner for Jay. The gross amount payable in respect
of Jay is $18,000. The tax-free component of the payment is
equal to $5,000 ($3,000 + $2,000) and the taxable
component of the payment is equal to $13,000
($7,000 + $6,000). The payment is a DASP and is subject
to the DASP withholding tax on the taxable component of the
payment ($13,000).
Payment from the Commissioner to a fund
147. A payment from the Commissioner to a fund under the S(UMLM) Act is
a 'roll-over superannuation benefit' for income tax purposes under
section 306-10 of the ITAA 1997. The rules to work out the
'element taxed in the fund' and the 'element untaxed in the fund'
of the taxable component of a superannuation benefit that is a
payment from the Commissioner under section 20H of the S(UMLM) Act,
are set out under Subdivision 307-E of the ITAA1997 [Schedule 1,
item 37, subsection 307-300(1)].
148. The element taxed in the fund of the taxable component of a
superannuation benefit that is a payment from the Commissioner, is
the total of the elements taxed in the fund of the taxable
component of the amounts paid to the Commissioner under the S(UMLM)
Act (to the extent they are included in the Commissioner's payment)
[Schedule 1, item 37, subsection 307-300(2)]. The amounts paid to
the Commissioner can be made under section 17 and/or Part 3A of the
S(UMLM) Act.
149. The element untaxed in the fund of the taxable component of a
superannuation benefit that is a payment from the Commissioner, is
the total of the elements untaxed in the fund of the taxable
component of the amounts paid to the Commissioner by providers
under the S(UMLM) Act (to the extent they are included in the
Commissioner's payment) [Schedule 1, item 37, subsection 307-
300(3)]. The amounts paid to the Commissioner can be made under
section 17 and/or Part 3A of the S(UMLM) Act.
150. The entire amount that is paid by the Commissioner to a fund as a
roll-over superannuation benefit is included in the 'contributions
segment' of the superannuation interest in the receiving fund and
is therefore part of the tax-free component of the interest
[Schedule 1, item 36, subsection 307-220(4)]. No part of an amount
of a DASP paid by the Commissioner to a fund as a roll-over
superannuation benefit under Part 3A of the S(UMLM) Act is included
in the assessable income of the receiving fund [Schedule 1, item
27, subsection 295-190(1A)]. This ensures that an amount which is
already subject to the DASP withholding tax is not further taxed
when it is paid by a fund as a superannuation benefit from the
interest.
Payment from the Commissioner to a person
151. Generally, a payment from the Commissioner to a person under
section 20H of the S(UMLM) Act is a DASP under section 301-170 of
the ITAA 1997 [Schedule 1, item 30, subsection 301-170(2)]. A DASP
is non-assessable income and non-exempt income under section 301-
175 of the ITAA 1997, however, at the time of making the payment
the relevant amount of DASP tax is withheld by the Commissioner.
Changes to the Superannuation (Departing Australia Superannuation Payments
Tax) Act 2007
Departing Australia superannuation payment withholding tax rates
152. Generally, a payment from the Commissioner under section 20H of the
S(UMLM) Act (and therefore made in respect of a departed temporary
visa holder) is a DASP under section 301-170 of the ITAA 1997
[Schedule 1, item 30, subsection 301-170(2)]. Accordingly, the
payment is subject to the DASP withholding tax and the relevant
amount of tax is withheld by the Commissioner at the time of making
the payment (refer to paragraph 2.22).
153. Schedule 1 to the DASPT Bill raises the DASP tax rates in the
Superannuation (Departing Australia Superannuation Payments Tax)
Act 2007 by five percentage points. This increase is aimed at
recovering some of the superannuation tax concessions provided to
departed temporary visa holders.
154. The final withholding tax rate on the element taxed of the DASP is
35 per cent (raised from 30 per cent) while the final withholding
tax rate on the element untaxed of the payment is 45 per cent
(raised from 40 per cent). [Schedule 1, items 4 and 5, paragraphs
5(1)(b) and 5(1)(c) of the DASPT Bill]
Excess untaxed roll-over amounts
155. The part of the element untaxed of a DASP that is paid from the
Commissioner to a fund (as a roll-over superannuation benefit)
which is below the 'untaxed plan cap amount' (as defined in the
ITAA 1997), is subject to the DASP withholding tax rate of 45 per
cent [Schedule 1, item 6, paragraph 5(2)(a) of the DASPT Bill].
The amount of tax is withheld by the Commissioner at the time of
the payment (refer to paragraph 2.22).
156. The part of the element untaxed of a DASP that is paid from the
Commissioner to a fund (as a roll-over superannuation benefit)
which exceeds the untaxed plan cap amount, is subject to the excess
untaxed roll-over amounts tax (under section 306-15 of the ITAA
1997). No DASP withholding tax is payable on the excess amount to
avoid double taxation on the excess amount [Schedule 1, item 6,
paragraph 5(2)(b) of the DASPT Bill]. The excess untaxed roll-over
amounts tax is withheld by the Commissioner at the time of payment
to a fund (refer to paragraph 2.22).
1.
Assume the Commissioner is required to pay an amount in
respect of Faleesha under section 20H of the S(UMLM) Act.
Faleesha is able to and directs for the payment to be made
to a complying superannuation plan. The total amount
payable is $1.02 million. Assume Faleesha's untaxed plan
cap amount for the year is $1 million. Of the payment, the
amount of $1 million is subject to the DASP withholding tax
and the remaining $20,000 is subject to the excess untaxed
roll-over amounts tax.
Changes to the Taxation Administration Act 1953
Penalties
157. Under the TAA 1953, a superannuation provider that does not pay an
amount that is payable under Part 3A of the S(UMLM) Act to the
Commissioner is liable to pay a general interest charge on the
unpaid amount after the time the amount becomes due and payable.
[Schedule 1, item 23, subsection 8AAB(5), item 13B]
158. A superannuation provider that does not return the amount paid to
it by the Commissioner under Part 3A of the S(UMLM) Act (which was
not credited by the provider within 28 days of receiving the
payment), is liable to pay a general interest charge on any unpaid
amount after the time the amount is required to be repaid.
[Schedule 1, item 23, subsection 8AAB(5), item 13C]
159. If a provider fails to pay an amount payable in respect of a person
under Part 3A of the S(UMLM) Act to the Commissioner, it is a tax-
related liability under the TAA 1953. [Schedule 1, item 25,
subsection 250-10(2) in Schedule 1, item 68]
160. An amount a provider is liable to repay to the Commissioner,
because it was not credited to a person's account within 28 days of
receiving the payment, is a tax-related liability under the TAA
1953. [Schedule 1, item 25, subsection 250-10(2) in Schedule 1,
item 69]
161. A superannuation provider could be liable to an administrative
penalty under the TAA 1953 if it gives a statement to the
Commissioner under the S(UMLM) Act that is false or misleading and
which results in the amount specified in the statement being less
than what it would have been if the statement had not contained
false or misleading information. [Schedule 1, item 26, subsection
284-80(1) in Schedule 1, item 1]
Taxation objections
162. A person, who is not a superannuation provider, can lodge a
taxation objection against a notice under section 20C of the
S(UMLM) Act. This includes the person identified in the notice or
their legal personal representative. The objection is required to
be made within two years (instead of the usual 60 days) of the
notice being given to the provider. [Schedule 1, item 24,
paragraph 14ZW(1)(bd)]
163. A person who is not a superannuation provider and who is
dissatisfied with a decision made by the Commissioner under the
relevant provisions in Part 3A of the S(UMLM) Act, can lodge a
taxation objection against that decision. For instance, the
decision may relate to making a payment, refunding an overpayment
or recovering an overpayment. The taxation objection must be
lodged within two years of receiving notice of the decision
[Schedule 1, item 24, paragraph 14ZW(1)(be)]. A person who can
lodge a taxation objection includes the departed temporary visa
holder, a legal personal representative or a beneficiary.
164. Under paragraph 14ZW(1)(c) of the TAA 1953, superannuation
providers who are dissatisfied with a notice given under section
20C of the S(UMLM) Act or a decision made by the Commissioner under
the relevant provisions in Part 3A of the S(UMLM) Act, have the
usual 60 days from when the notice under section 20C of the S(UMLM)
Act was given, or when the notice of the decision was given, to
lodge a taxation objection.
Application and transitional provisions
165. Changes to the TAA 1953 and the ITAA 1997 apply from the
commencement of Schedule 1 to the main Bill.
166. Increases to the DASP withholding tax rates apply from the
commencement of Schedule 1 to the DASPT Bill.
167. A request for a DASP that is made before the commencement of
Schedule 1 to the DASPT Bill is subject to the DASP withholding tax
rates that apply before that commencement [Schedule 1, item 7 of
the DASPT Bill]. That is, a 30 per cent or 40 per cent withholding
tax rate applies to a request for DASP that is made before the
commencement of Schedule 1 to the DASPT Bill.
Chapter 4
Regulation impact statement
Background
168. Under the Superannuation Guarantee (Administration) Act 1992, all
employers are required to make a prescribed minimum level of
superannuation contributions to a complying superannuation fund on
behalf of their eligible employees or else incur the superannuation
guarantee (SG) charge. The minimum level of employer
superannuation support required under the SG is 9 per cent of an
eligible employee's earnings base. Eligible employees include
foreign workers on temporary working visas in Australia who earn
more than $450 in a month and are under the age of 70.
169. Superannuation is a concessionally taxed savings vehicle. SG
contributions are generally concessionally taxed at the rate of
15 per cent and are tax deductible to the employer. Earnings are
also generally concessionally taxed at 15 per cent. These tax
concessions are estimated to be around $26.8 billion in 2007-08 and
are designed to encourage citizens to save for their retirement
thereby boosting retirement incomes and reducing reliance on the
age pension.
170. The Government is concerned by the growing amount of superannuation
which has been identified as lost over the last decade.
Superannuation funds are required to report details of lost members
to the Australian Taxation Office (ATO). These details are
recorded on the Lost Members' Register to assist individuals in
locating their accounts. The ATO's 2006-07 annual report shows the
number of superannuation accounts reported on the Lost Members'
Register grew from 5.7 million to 6.1 million in that income year.
These inactive accounts total approximately $12 billion in assets.
Temporary residents who depart Australia (after their visa has
expired or been cancelled) and do not claim their superannuation
contribute to the number of lost accounts.
171. Lost and inactive accounts impose operational costs on both the ATO
and superannuation funds. The ATO manages the Lost Members'
Register which requires supporting IT systems. In this role the
ATO contacts individuals encouraging them to consolidate their lost
accounts. The Lost Members' Register also places reporting
obligations on funds. Funds are required to manage lost accounts.
Member protection rules generally prevent superannuation funds
deducting fees and charges on a member's account where the account
balance is less than $1,000.
172. Since 1 July 2002 eligible temporary residents who have departed
Australia have been able to access their superannuation benefits
through the departing Australia superannuation payment. In most
cases, a 30 per cent final tax is withheld from the payment.
173. The policy objective behind the introduction of the departing
Australia superannuation payment system was to reduce the
administrative and compliance costs that superannuation funds incur
in preserving the superannuation benefits of temporary residents
who have departed Australia and who will not be retiring in
Australia. It was anticipated that the departing Australia
superannuation payment entitlement would reduce the likelihood that
temporary residents would lose track of their superannuation
savings once they have departed Australia.
174. Despite the ability to claim their superannuation upon departing
Australia and having an expired or cancelled visa, most temporary
residents do not do so, thereby leaving behind significant amounts
of small and lost account balances in Australia's superannuation
system.
175. The previous government announced in the 2007-08 Mid-Year Economic
and Fiscal Outlook a measure to require the future superannuation
contributions and existing balances for temporary residents to be
paid to the Australian Government, with effect from 1 July 2008.
176. The Government issued a public consultation paper on the proposal
and sought submissions and comments from stakeholders by
26 May 2008.
Policy objectives
177. The policy objectives are to:
. ensure that superannuation tax concessions are well
targeted at individuals who will retire in Australia; and
. reduce the number of lost superannuation accounts.
178. Reflecting these considerations the Government does not consider it
appropriate for temporary residents who have departed Australia
(and whose visa has expired or been cancelled) to retain benefits
in Australian superannuation funds. The Government considers
amounts in superannuation funds that are unlikely to be claimed
should be transferred to the Australian Government with the ability
for individuals to claim amounts if later identified.
Implementation options
179. Following consideration of consultation outcomes, the Government
considered two implementation options, detailed below.
Option 1: Annual transfer and five-year claim period
180. Superannuation held on behalf of temporary residents (herein
defined as temporary resident superannuation) will be paid to the
Australian Government (through the ATO) on an annual basis.
181. The ATO will data match information provided by the Department of
Immigration and Citizenship (DIAC) to identify superannuation funds
that hold balances on behalf of current and former temporary
residents. The ATO will notify funds of members who are temporary
residents, and funds will pay superannuation they hold for those
persons to the ATO within a specified time frame.
182. Employers would also be given the option to pay their SG
contributions directly to the ATO.
183. Temporary residents who depart Australia and whose visas have
expired or been cancelled will be able to claim amounts paid to the
ATO, if they make a valid application within five years of
departing, subject to the existing withholding tax arrangements.
No interest will be paid on these amounts. Amounts not claimed
within five years will be forfeited to the Commonwealth (including
for previously departed temporary residents).
184. Temporary residents who become permanent residents would have their
superannuation (with interest) transferred to a superannuation
fund.
Option 2: Departure model - transfer only if unclaimed after
departure and unlimited claim period
185. The superannuation of departed temporary residents whose visas have
expired or been cancelled will be paid to the Australian Government
(through the ATO). That is, the payment of temporary residents'
superannuation to the ATO will not occur until six months has
elapsed after they have departed Australia and their visa has been
cancelled or expired.
186. The ATO will data match information provided by DIAC to identify
superannuation funds that hold balances for departed temporary
residents. The ATO will notify these funds to enable them to pay
any superannuation balances they hold for departed temporary
residents to the ATO within a specified time frame.
187. Employers will not be given the option to pay any superannuation
contributions directly to the ATO.
188. Temporary residents who depart Australia will be able to claim
amounts paid to the ATO, less applicable tax.
189. Temporary residents who become permanent residents would have
amounts paid to the ATO transferred into a superannuation fund. No
interest will be paid under this option.
1. : Comparison of the key features
| |Option 1 |Option 2 |
|Accounts required|All temporary |Only departed |
|to be paid to the|resident |temporary |
|ATO |superannuation |residents whose |
| |accounts, |visas have |
| |including |expired or been |
| |departed |cancelled who |
| |temporary |have not taken |
| |residents and |their |
| |temporary |superannuation |
| |residents |benefits within |
| |currently |a specified |
| |working in |period after |
| |Australia (ie, |departing |
| |both active and |Australia. |
| |inactive | |
| |accounts). | |
|Claim window for |Five years. |Unlimited. |
|departed | | |
|temporary | | |
|residents | | |
|Interest paid on |For those who |No. |
|amounts held by |become permanent| |
|the ATO |residents only. | |
|Potential loss of|Yes. |No. |
|insurance | | |
|coverage while in| | |
|Australia | | |
Impact analysis
Impact group identification
190. Key stakeholders affected by the proposal include temporary
residents, employers, superannuation funds and government agencies.
Temporary residents
191. Temporary residents with amounts in superannuation will be
affected.
192. The majority of temporary residents in employment comprise working
holiday makers (such as backpackers) and students. However, there
are a growing number of business visa categories that encompass
highly paid and highly skilled temporary residents. These may
include company executives, university appointments and individuals
with unique skills such as artistic directors, and those in high
demand skill categories such as doctors.
193. In 2006-07 there were over 134,000 working-holiday maker visas
granted with work rights and 228,592 temporary student visas
granted. Of the student visas 46 per cent went on to apply for
Permission to Work. Since 26 April 2008, all student visa holders
are granted permission to work with their initial student visa, no
longer requiring students to apply separately for work rights.
194. There were over 87,300 business long-stay 457 visas issued. The
average annual salary of a temporary resident on a business long-
stay 457 visa is estimated to be $71,600.
195. Some 60 per cent of temporary residents on 457 visas who arrived
five years ago are still in Australia, either on renewed 457 visas
or having transitioned to permanent residency. This is in contrast
to the approximately 5 per cent of working holiday makers who have
not departed in the last five years.
196. Holders of retirement visas (subclasses 405 and 410) may also be
affected as these visas are classified as temporary visas.
197. New Zealanders are excluded from the measure. This recognises the
close economic relationship between Australia and New Zealand,
including the ongoing work between the two countries to harmonise
their superannuation systems via portability arrangements. New
Zealanders are exempt from the existing arrangements for departing
Australia superannuation payments.
Employers of temporary residents
198. Employers of temporary residents may be affected by the measure.
Superannuation funds
199. Superannuation funds that hold superannuation on behalf of
temporary residents will be affected by the measure.
200. As there is no obligation on superannuation providers to report
which members are temporary residents, there is no data available
to indicate which funds hold benefits on behalf of temporary
residents. However, it is expected that the vast majority of the
estimated 550 large to medium funds would have members who are a
current or departed temporary resident.
201. The great majority of self-managed superannuation funds are not
expected to be affected by the measure as it is unlikely that they
are established and maintained by temporary residents, given the
residency requirements which must be satisfied in order to gain
complying status.
The Australian Taxation Office and the Department of Immigration
and Citizenship
202. The ATO will be responsible for the administration of this measure.
DIAC will be required to provide information on temporary resident
visa holders to the ATO.
Impact of options
Option 1: Annual transfer and five-year claim period
203. This option meets the policy objective of reducing the number of
lost accounts. However, there is potential that this model would
exacerbate the problem of small accounts as account balances could
be paid to the ATO while the accounts are still active. Small
accounts can increase costs for superannuation funds. For example,
funds may have to close and reopen accounts for the same member in
order to continue to receive contributions for them in later
periods. In addition, transferring amounts to the ATO annually
would keep the balances low in perpetuity, therefore being more
likely to trigger the member protection provisions which limit
funds from charging fees on small accounts.
204. This option also meets the policy objective of ensuring that
superannuation taxation concessions are targeted at those retiring
in Australia.
205. However, this measure may not address the Government's concerns to
minimise the impact on skilled labour shortages, and it may also
increase the compliance burden on employers who elect to pay SG
contributions direct to the ATO. It also imposes significant
compliance costs on superannuation providers and the ATO and could
have potential unintended impacts on holders of some visa classes.
206. The potential loss of benefits, interest and insurance cover for
temporary residents, could affect employers ability to attract and
retain qualified foreign staff under existing remuneration packages
that feature superannuation benefits.
207. In order to take advantage of being able to pay their SG
obligations directly to the ATO and not having to offer choice of
fund to temporary residents, employers would need to be able to
identify temporary residents. If employers incorrectly paid SG to
the ATO they would risk incurring SG penalties. Given this risk,
it is expected few employers would use this method. However the
ATO would need to inform employers of this option, for example by
amending their information products, and ensure their IT systems
have the capability to accept employer payments.
208. This option does not include transitional arrangements for
temporary residents who departed more than five years ago. That
is, these amounts are immediately forfeited even where previously
departed temporary residents had consciously decided to leave their
superannuation in Australia.
209. This option, as originally announced, included no exemptions aside
from New Zealand citizens. Temporary residents holding a
retirement visa (subclasses 405 and 410) would be subject to the
annual transfer and therefore would lose access to all of the
savings they are expected to use to self fund their stay in
Australia (at least until their visa expired, or was cancelled, and
the individual left the country). These individuals cannot readily
become permanent residents and generally do not depart Australia on
a permanent basis.
210. This measure introduces significant implementation costs and
ongoing costs for superannuation providers.
211. The implementation costs are estimated by the ATO as potentially
$100,000 per superannuation provider. These costs represent the
required IT systems changes to track temporary residents and report
and make annual payments to the ATO and amendments to their product
disclosure statements. This represents an estimated implementation
cost to industry of potentially $90 million.
212. The ongoing costs are estimated by the ATO as
$3,612 per superannuation provider. The ongoing costs represent
the costs of closing and reopening accounts and remitting payment
to the ATO. There may also be increased contact from members who
query the fund's action of transferring their balances to the ATO.
This represents an estimated annual ongoing cost to industry of
almost $3.3 million.
213. Implementation and ongoing costs would also be significant under
this option for the ATO and DIAC. The ATO and DIAC would be
required to establish new processes to share information. The ATO
would maintain records for superannuation held on behalf of
temporary residents and pay amounts to departed temporary residents
and temporary residents who become permanent residents. The ATO
will face ongoing administrative costs associated with data
matching and advising superannuation funds where they hold benefits
on behalf of temporary residents. The ATO will also need to
process the annual transfer from superannuation funds.
214. Provisions for costs of $10 million per annum for the ATO and $2
million per annum for DIAC over the forward estimates period were
made in the 2007-08 Mid-Year Economic and Fiscal Outlook.
Option 2: Departure model
215. This option achieves the policy objectives of reducing the number
of small and lost accounts more effectively than option 1 as
temporary resident superannuation is only transferred to the ATO
after the temporary resident has departed Australia, which is when
the likelihood of becoming a lost member is greatest.
216. This option also meets the policy objective of ensuring that
superannuation taxation concessions are targeted at those retiring
in Australia. However, temporary residents may have access to
superannuation tax concessions while they work in Australia.
217. This option is not likely to have the unintended adverse impacts in
relation to insurance and remuneration as outlined in option 1, and
is estimated to be implemented at lower costs to superannuation
providers and at no cost to employers.
218. Temporary residents would maintain their connection with their
superannuation fund while in Australia and therefore have control
over their superannuation and continued insurance coverage. The
impact on the employment of foreign workers is likely to be
negligible.
219. There would be lower implementation costs for superannuation
providers. These are estimated by the ATO to be potentially
$33,333 per superannuation provider. This represents an estimated
implementation cost to industry of potentially $30 million.
220. Option 2 has lower annual ongoing compliance costs for
superannuation funds as there would be approximately half the
number of transactions per annum of option 1. The ongoing costs
are estimated by the ATO as $2,508 per superannuation provider.
This represents an estimated annual ongoing cost to industry of
almost $2.3 million.
221. Implementation and ongoing costs for the ATO and DIAC are estimated
to be the same under each option. The ATO and DIAC would be
required to establish new processes to share information. Under
this option the temporary resident retains the right to claim the
benefit at anytime. Therefore, the ATO has an obligation to
implement and maintain an information and payment system for the
temporary resident to claim their entitlements. The ATO will also
need to process transfers from superannuation funds under both
options, however, option 2 will require the transfer of fewer
amounts.
222. Provisions for costs of $10 million per annum for the ATO and $2
million per annum for the DIAC over the forward estimates period
were made in the 2007-08 Mid-Year Economic and Fiscal Outlook.
Consultation
223. On 5 May 2008, the Government released a consultation paper titled
Temporary Residents and Superannuation seeking comments and
submissions to assist in settling the final administrative and
legislative design features of the measure. Submissions closed on
26 May 2008. As part of the consultation process, Treasury
officials also conducted meetings with several industry groups from
19 to 22 May 2008 in Canberra, Sydney and Melbourne.
224. The Government received 47 written submissions through the
consultation process. The overwhelming majority of submissions
expressed strong concerns with the measure and its application. A
number of submissions contended that the policy was inconsistent
with the Government's broader policy agenda, particularly in
relation to addressing skills shortages and encouraging private
savings through superannuation.
225. Several submissions questioned the extent to which the measure
under option 1 would achieve its stated policy rationale of
minimising the proliferation of lost accounts. While many
submissions acknowledged the importance of attending to the problem
of lost superannuation, a number challenged the measure's
effectiveness in this regard. Submissions also indicated that
compliance costs for the measure were expected to be high.
226. Specifically, submissions expressed strong concern at the different
treatment of temporary residents under the measure, including
moving benefits to the ATO when the temporary resident was still an
active member, the removal of choice of fund and the lack of
interest on amounts held by the ATO. Also of concern was the
potential loss of insurance coverage for temporary resident
employees under option 1, particularly with industry funds
supporting individuals working in high-risk industries such as
mining, building and construction.
227. A number of industry associations proposed alternative models that
reduced fund compliance costs and avoided the loss of insurance
cover for temporary residents while working in Australia. Option 2
is based on the common features of the models put forward by
industry.
Conclusion and recommended option
228. Option 2 better reduces lost and small accounts than option 1.
Option 1 is marginally better at limiting temporary residents'
access to superannuation tax concessions than option 2. However,
option 2 imposes lower compliance costs on superannuation funds
than option 1. Both options impose similar implementation and
ongoing costs on the ATO and the DIAC.
229. Option 2 only applies after the temporary resident departs and
their visa has expired or been cancelled where they have not taken
their superannuation benefits within six months after departing
Australia. It is at this time that the likelihood of becoming a
lost member is greatest. This model allows temporary residents to
maintain a connection with their superannuation while in Australia,
thereby avoiding concerns about the loss of insurance and
investment options. In addition, this model avoids imposing
potential difficulties on employers recruiting foreign workers.
Index
Temporary Residents' Superannuation Legislation Amendment Bill 2008
Schedule 1: Amendments
|Bill reference |Paragraph |
| |number |
|Item 5 |1.12 |
|Item 6 |1.12 |
|Item 7 |1.12 |
|Item 8 |1.12 |
|Item 9 |1.12 |
|Items 10 and 16, section 20B |1.12 |
|Item 11 |1.12 |
|Item 12 |1.12 |
|Item 13, subsection 16(7) |3.13 |
|Item 14, subsection 17(1) |3.16 |
|Item 15, subsection 17(2A) |3.19 |
|Item 16, section 8 and subsection 20F(6) |1.56 |
|Item 16, subsection 17(2A) |2.23 |
|Item 16, subsection 20C(1) |1.13, 1.21 |
|Item 16, subparagraph 20C(1)(b)(i) |1.14 |
|Item 16, subsection 20C(2) |1.16 |
|Item 16, subsection 20C(3) |1.15 |
|Item 16, subsection 20C(4) and section 20J |1.18 |
|Item 16, subsection 20C(5) |1.17 |
|Item 16, section 20D |1.35 |
|Item 16, sections 20D and 20E |1.28 |
|Item 16, subsection 20E(1) |1.32 |
|Item 16, paragraph 20E(2)(a) |1.28 |
|Item 16, paragraph 20E(2)(b) |1.29 |
|Item 16, subsection 20E(3) |1.31 |
|Item 16, subsection 20F(1) |1.35, 1.52, |
| |1.53 |
|Item 16, subsection 20F(1) and paragraph |1.38 |
|20F(2)(a) | |
|Item 16, paragraph 20F(1)(a) |1.53 |
|Item 16, subsection 20F(2) |1.36 |
|Item 16, paragraph 20F(2)(a) |1.38 |
|Item 16, subparagraph 20F(2)(a)(ii) |1.38 |
|Item 16, paragraph 20F(2)(b) |1.40 |
|Item 16, paragraph 20F(2)(c) |1.40, 1.49 |
|Item 16, subsection 20F(3) |1.42, 1.43 |
|Item 16, paragraph 20F(3)(a) |1.44 |
|Item 16, paragraph 20F(3)(b) |1.49 |
|Item 16, paragraph 20F(3)(d) |1.50 |
|Item 16, paragraph 20F(4)(a) |1.41, 1.51 |
|Item 16, paragraph 20F(4)(b) |1.57 |
|Item 16, subsection 20F(5) |1.55 |
|Item 16, section 20G |1.58 |
|Item 16, subsection 20H(1) |2.14, 2.15 |
|Item 16, paragraph 20H(1)(a) |2.13. 2.16 |
|Item 16, subparagraph 20H(1)(a)(ii) |2.16, 2.17 |
|Item 16, paragraph 20H(1)(b) |2.13, 2.18, |
| |2.19, 2.20 |
|Item 16, subsection 20H(2) |2.25 |
|Item 16, subsection 20H(3) |2.26 |
|Item 16, subsection 20H(4) |2.27 |
|Item 16, subsection 20H(5) |2.22 |
|Item 16, subsection 20H(6) |2.22 |
|Item 16, section 20K |1.60 |
|Item 16, subsection 20L(1) |2.30 |
|Item 16, subsection 20L(2) |2.36 |
|Item 16, subsection 20L(3) |2.31 |
|Item 16, paragraph 20L(4)(a) |2.32 |
|Item 16, paragraph 20L(4)(b) |2.32 |
|Item 16, paragraph 20L(4)(c) |2.37 |
|Item 16, subsection 20L(6) |2.34 |
|Item 16, subsection 20L(7) |2.37 |
|Item 16, subsection 20L(8) |2.33 |
|Item 16, subsections 20M(1) and (2) |2.38 |
|Item 16. subsection 20M(2) |2.39 |
|Item 16, subsection 20M(3) |2.40 |
|Item 16, subsection 20M(4) |2.41 |
|Item 16, section 20N |3.20 |
|Item 16, subsection 20N(2) |3.22 |
|Item 16, subsection 20N(3) |3.23 |
|Item 16, subsection 20N(4) |3.21 |
|Item 16, section 20P |2.28 |
|Item 17, subsection 25(2A) |3.28 |
|Item 18, section 25A |3.27 |
|Item 20, paragraph 29(1)(aa) |3.29 |
|Item 21, subsection 29(4) |3.29 |
|Item 22, section 49 |3.30 |
|Item 23, subsection 8AAB(5), item 13B |3.49 |
|Item 23, subsection 8AAB(5), item 13C |3.50 |
|Item 24, paragraph 14ZW(1)(bd) |3.54 |
|Item 24, paragraph 14ZW(1)(be) |3.55 |
|Item 25, subsection 250-10(2) in Schedule 1,|3.51 |
|item 68 | |
|Item 25, subsection 250-10(2) in Schedule 1,|3.52 |
|item 69 | |
|Item 26, subsection 284-80(1) in Schedule 1,|3.53 |
|item 1 | |
|Item 27, subsection 295-190(1A) |3.42 |
|Item 30, subsection 301-170(2) |3.31, 3.34, |
| |3.44 |
|Item 30, subsections 307-170(3) and |3.35 |
|301-170(4) | |
|Item 31, subsection 307-5(1), item 5 in the |3.33 |
|table | |
|Items 31 and 32, subsection 307-5(1), item 5|3.31, 3.32 |
|in the table | |
|Item 34, paragraph 307-120(2)(e) |3.36 |
|Item 35, subsection 307-142(1) |3.36 |
|Item 35, subsection 307-142(2) |3.37 |
|Item 35, subsection 307-142(3) |3.38 |
|Item 37, subsection 307-220(4) |3.42 |
|Item 37, subsection 307-300(1) |3.39 |
|Item 37, subsection 307-300(2) |3.40 |
|Item 37, subsection 307-300(3) |3.41 |
Superannuation (Departing Australia Superannuation Payments Tax) Amendment
Bill 2008
Schedule 1: Amendments
|Bill reference |Paragraph |
| |number |
|Items 4 and 5, paragraphs 5(1)(b) and |3.46 |
|5(1)(c) of the DASPT Bill | |
|Item 6, paragraph 5(2)(a) of the DASPT Bill |3.47 |